MNB Raises Base Rate by 125 bp to 13%

MNB

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The Monetary Council of the National Bank of Hungary (MNB) raised the central bank base rate by 125 bp to 13% at a monthly policy meeting on Tuesday, according to a report by state news wire MTI.

The rise followed a 100 bp hike at the policy meeting in August.

The council also decided on Tuesday to raise the O/N deposit rate by 125 bp to 12.5%, and the O/N and 1-week collateralized loan rates by 125 bp to 15.5%.

The O/N deposit rate and the collateralized loan rate mark the bottom and the top, respectively, of the central bank's "interest rate corridor". The base rate is paid on mandatory reserves.

The End of the Tightening Cycle

In a statement issued after the meeting, the council announced the end of the tightening cycle with the September hike, but said that tight monetary conditions will be maintained with a focus on sterilizing liquidity and improving monetary policy transmission. 

"In the Monetary Council's assessment, by the current level of the base rate, interest rate conditions have become sufficiently strict, which ensures the achievement of the inflation target. The Monetary Council has decided to stop the cycle of base rate hikes after the step in September," the Council said.

"Tight monetary conditions will be maintained over a prolonged period, which will ensure that inflation expectations are anchored and the inflation target is achieved in a sustainable manner. Looking ahead, tightening liquidity and further enhancing monetary transmission will be in the [MNB]'s focus, for which the central bank may decide on additional measures in the future," the policymakers added.

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